While grocery retailers have worried about the supermarket up the street for many years, now they’re dealing with that same supermarket up the street, as well as various online models, meal kit delivery and alternative food and nonfood formats, including dollar, convenience and drug. In many categories, we see conventional retailer sales being squeezed while the opposites of the value spectrum (limited assortment and dollar store on the one end and specialty/organic formats on the other) are gaining in dollar share. At the same time, food e-commerce is ramping up, particularly in center store and routine purchases.
What’s a retailer's best weapon in this competitive environment? People. Great people.
It’s that simple and yet that complex. And more complex today than just a few years ago, according to the 2019 Compensation and Benefits Study released recently by FMS Solutions. The report finds that the solid state of the U.S. economy and the ever-improving job market is having a profound effect on independent food retailers. The smaller applicant pool is putting pressure on hiring and retention, which appears to cause upward pressure on salaries and hourly wages, as well as adjustments to benefits structures, such as healthcare coverage, pension plans and bonus payouts.
“To retain and attract talent, it is important retailers shift from a mental framework of abundance to scarcity, starting with rightsizing salaries, bonuses and benefits,” says Bob Graybill, president and CEO of FMS. “One of the best ways for independent grocers to stand out in today’s marketplace is through best-in-class customer service. It’s a key way to drive loyalty, increase sales and enhance margins. But it means investing in your employees, new and current.”
Compensation Is Key
In 2018, wage increases across exempt and nonexempt employees averaged 2.6%, according to the study, which included input from 156 independent food retailers covering more than 5,000 stores. Raises among exempt employees were slightly higher than those of nonexempt employees. Given the low unemployment, independent grocers expect higher increases for 2019, particularly among nonexempt employees. Compared with the last study in this series, conducted in 2014, salaries and hourly wages for most titles have increased. Additionally, a higher share of titles have bonus eligibility, even for many of the store-level employees. More than 9 in 10 independent grocers offer bonus or incentive plans. The likelihood of having bonus/incentive structures in place rises along with the size of the company, and goal-oriented plans are the most common.
“More grocery retailers are incentivizing top performers with a small bump in hourly pay, quarterly bonuses or other performance-based rewards,” Graybill says. “Often these are based on sales performance, but other factors, such as curbing shrink or customer service scores, are playing a role as well.”
The study finds that healthcare coverage is widely available at independent grocers. At 6 in 10 independent grocers, employees are eligible for health plan participation at 90 days of employment or prior. The annual premiums continue to be paid mostly by the employer, with the employer contribution ranging from $4,531 for coverage of single employees to more than $9,000 for family coverage. Single-store operators continue to be more likely to absorb a greater share of total health plan costs.
The study also finds that retailers are leveraging a variety of retirement plans to drive longevity with the company. Nearly three-quarters of independent retailers have retirement plans in place, with 401(k) plans with match being the most common. Profit-sharing plans, defined contribution plans and employee stock ownership programs are more common among larger independent grocers than one-store operators.
Employee hiring and retention concerns are likely going to take center stage once more in the current economic climate. As it is, departments such as meat are struggling to fill vacancies. A quick search for meat director/manager on job boards shows hundreds of openings at retailers across the country. As the grocery retailing industry, we have to find ways to attract young talent and change the mindset from an interim job to a fun, long and successful career in food retailing. Rightsizing compensation and benefits for both current and future employees can be a great start.
Anne-Marie Roerink is principal and founder of 210 Analytics, which specializes in quantitative and qualitative market research. Reach her at firstname.lastname@example.org.